Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Here's Why Grayscale Bitcoin Trust Is Soaring Today

Cryptocurrencies are staging quite a comeback.

What happened

Grayscale Bitcoin Trust(NASDAQOTH:GBTC), an investment vehicle designed to allow investors to indirectly own bitcoin, is moving higher on Wednesday. As of 3:20 p.m. EDT, shares of the fund were up by about 11%.

So what

As you can probably guess, Grayscale Bitcoin Trust is moving higher because the price of bitcoin is rising. Bitcoin has gone up by 38% in the past week and is now trading for more than $8,100 -- the highest price we've seen in months and more than double the lows reached earlier this year.

Image source: Getty Images.

The main reason for the continued rally seems to be increased demand from institutional investors. There's a rumor that Fidelity is preparing to offer cryptocurrency trading to institutional clients, and Grayscale Bitcoin Trust itself recently reported record inflows during the first quarter, with about three-fourths of the new money coming from institutional investors.

Now what

There are a few things to keep in mind. First, even after its recent rally, bitcoin is trading for less than half of its 2017 peak value of nearly $20,000, so we're still a long way from breaking out to new highs.

And, also keep in mind that while Grayscale Bitcoin Trust's price moves with the price of bitcoin, it's not always a perfect relationship. Specifically, the trust often trades at a massive premium to the value of the bitcoin it owns -- as I write this, the premium sits at about 30%, but has been much higher in the past.

Author

Matt is a Certified Financial Planner based in South Carolina who has been writing for The Motley Fool since 2012. Matt specializes in writing about bank stocks, REITs, and personal finance, but he loves any investment at the right price. Follow me on Twitter to keep up with all of the best financial coverage!
Follow @TMFMathGuy